Human Resource Practices in Innovative Clusters

It has been said that people are the center of success for any organization. They build things, invent things, and sell things. Leaders rely on their highly skilled workers to keep their business growing in the right direction. Clusters are sources of innovation and it is necessary to recruit and attract the right kind of people for success. According to an article in the International Review of Management and Marketing Journal, Human resource practices can have a big impact on corporate success within a cluster setting (Doronina, et. al., 2016).

Human resource practices are important for innovative clusters as the essential soul of such systems is their high quality talent and technical "know how". Management of people within a cluster have two important aspects such as...

1. Defining and enacting business objectives.
2. Managing people within the cluster.

The first aspect applies to all types of businesses regardless of where they are located. The second aspect takes on considerable importance as we consider the nature of creativity and innovation needed to lead the market.

Human resource management entails hiring the right people and preparing them for the highest performance possible. Cluster oriented employees are high performers and typically have attained a significant amount of skill and knowledge. According to the study 85% of people have gained higher education degrees and 10% specialized skills.

Because skills are advanced, managers will often spend a considerable amount of time training and retraining employees to ensure they are up-to-date on job requirements. Advanced clusters that offer leading edge products, need specialized skills that can make those products. Higher education and training are a part of that process of product development and manufacturing.

Companies will also need to develop creative environments that offer opportunities to maximize idea generation and exploration. They may consider the use of new management techniques, environmental design, and corporate culture to encourage employee's creative juices to start flowing. High technology and innovative companies often seek to create stimulation rich environments that foster the mind as the greatest asset.

While many of the principles of strong human resource tactics make their way into clusters there is an increased need to attract and foster highly educated and innovative employees. High innovation employers will emphasize the recruitment of highly educated/skilled employees, continuously train them to work on leading edge products, and develop environments that enhance their thinking abilities. Creative and innovative environments use human resource practices designed to feed and enhance these environments that leads to greater intellectual capital within the company.

Doronina, I, etc.. (2016) Human Resource Management Features of an Innovative Cluster. International Review of Management and Marketing, 6 (6s).

Military Spending vs. Higher Education

Should we spend on Education or the Military? As a nation we must debate the use of our money in order to ensure we are using national resources in a way that further the interest of the country. Budget battles and rising costs are hitting the necessary functions of higher education and the military hard in a way that makes us believe the battle is between the two. The guns vs. butter debate has been a staple for intellectual debate since the beginning of modern society.

It isn't easy to choose one over the other and few can claim they have the right answers. We need a strong military that can handle the growing threats around the world but at the same time we need an educated workforce that keeps our economy growing. The argument has been pitted education vs. military when this is not really the case.

The question really isn't whether we should or should not be spending on either of these institutions, but whether we need to rethink them. When our hands are tied with limited budgets and we don't have new sources of revenue coming anytime soon, we need to find new ways of solving the problem. It requires a paradigm shift in our thinking.

People relate to institutions through a cultural lens based on past experiences which make it difficult for them to view them differently.  As time changes, we must continually update our thinking or otherwise we get stuck in process that doesn't allow for necessary adjustments and changes.

We have a number of options when it comes to the military and higher education budget:

1. Cut military funding and spend more on higher education.
2. Cut higher education funding and spend more on the military.
3. Do nothing.
4. Cut other programs and put the saved money into the military, higher education, or both.
5. Rethink one or both institutions and force reforms that make them more cost effective while not reducing performance.

Option 1,2, &3 seem to be the mindset we are in as a nation. We are thinking this is an either/or debate where one leads to the other because we framed it that way. The news media reports it this way, our political leaders are trying to sell it this way, and we have come to understand it this way. However, we might consider a combination of 4 and 5 as our best approach.

If the military and higher education are important to us, we can consider reviewing all government spending and closing programs that are of less importance and allocating that money to higher education and the military. It is even possible to use the argument that since higher education has a big influence on quality of life, health, productivity, and the economy we may want to cut other social programs and focus on quality education and the military capacity to protect our lifestyle.

We may also want to rethink both institutions and review what is working, what isn't, and the best uses of money. Could we reform higher education to make it more relevant as well as cost effective whereby it educates more people at a higher level? Certainly, we can consider the growing push to reform and looming budgeting problems as a signal that option 5 may be a serious one to consider. Likewise, pushing our military to do more with less while reforming to increase capacity can't hurt if it is done in a logical and sound manner.

A Systemic Approach to Corporate Performance and Cross-Corporate Innovation

Companies have input and output departments and these are often seen as cost centers. They don't make money and are instead allocated a budget based on the total sales of the company. However, at their core, businesses are seen as bundles of efficient transactions that allow them to create value by being more than the sum of their parts. According to an article published in the Business Management Dynamics Journal thinking systemically it is possible to turn cost centers into efficient profit centers in that it allows them to learn from their environment (Roth, 2014). In turn, they would also be able to create additional cross corporate collaboration by selling their services.

Consider the nature of an organization that is based on a number of departments such as design departments, production departments, advertising departments, etc... Each has a value to the organization but often become non-competitive due to the captive nature of their internal customers. Such departments can lose their efficiency, and when this occurs across an entire organization, it could mean bankruptcy.

According to the article, if we were to allow them to bill internal customers for their budgets and take on additional work outside of the firm it is possible to raise their performance level by keeping them connected to the needs of the market. If internal departments become non-competitive they should be adjusted and changed or closed down so the function can be outsourced.

While the article doesn't address this question, the selling of services to the outside market creates greater cross-corporate collaboration by encouraging transferring of new ideas through corporate collaboration. The greater connection among businesses within a cluster, the more likely they will transfer new knowledge, reduce costs, and innovate. Selling services allows companies to borrow competencies for projects.

One one hand, we have the benefit of improved internal performance, efficiency, and costs while on the other hand we have greater collaboration with other companies that can lead to cluster collaboration and innovation.

Internal Benefits:

1. Improved performance
2. Improved Efficiency
3. Reduction of Internal Costs
4. Increased revenue sources.

External Benefits:

1. Improved collaboration.
2. Stronger transference of knowledge.
3. Development of more efficient clusters.
4. Creation of new industries.

The systemic approach to billable services and outside customers can work for some departments. For example, product design, labor competencies, marketing, product knowledge, and many others have formulated specific competencies based on their unique approaches to the market. Cluster members may want to contract those abilities to help them launch or service a new product. As these companies buy and sell their unique abilities they increase the performance of the entire cluster and create new cluster efficiencies that may be difficult to match in other areas.

Rother, W. (2014). A systemic approach to improving corporate performance. Business Management Dynamics, 4 (4).

U.S. Lowers in Happiness Rating. Why does it matter?

Happiness, elusive and often ignored component of economic success. The happiness rating of the U.S. just moved down from 13 to 14 this year according to the World Happiness Report. It slid from 11 to 14 since the beginning of the report in 2012. The report focused on perceptions as they relate to income, health, social connections, reliance, freedom, trust and corruption of business and government.

In wealthier countries like the U.S., physical and mental health as well as relationship quality seems to be the most important factor for happiness. Poorer countries seek out money as an important contributor to their happiness. The results seem to make sense that once our basic needs are met money has diminished utility.

The study does help us consider how important it is to develop meaningful relationships with others and find ways to improve our lives. Many Americans are simply unaware of what makes them happy, don't reflect on their lives, and have lost touch with relatives. We are focused on making money without adequate work-life balance.

As a country we should consider the importance of happiness and how it impacts our nations health and economy.  Happy citizens cost less from a medical perspective-lowering the need for expensive social healthcare programs. Likewise, healthier citizens are more productive and spend more of their excess capital leading to improvements in the labor market and economic growth.

Popular benchmarks such as GNP, and GDP are important but don't tell the whole story. Viewing how people feel from a happiness perspective leads to greater social stability and "togetherness". We are are more than dollar signs and our happiness is important to maintaining our way of life and values as a nation. Considering the many transformations we went through, our economic happiness matters to our vitality as a nation.

Sustainable Development Solutions Network (SDSN) (2019). World Happiness Report 2017. Retrieved http://worldhappiness.report/ed/2017/

Adam Smith and the Role of Limited Government

Adam Smith, the father of economics taught us in his book The Wealth of Nations, that laissez-faire approaches to the market encourage the highest levels of growth. Government is limited in its role and provide the greatest freedom to business without unnecessary restriction. As we experienced during the advent of globalization, companies regularly choose nations with lower input costs and fewer restrictions. Newly formed clusters will need to offer something more than simply "cheap" costs and instead push for maximum growth opportunities through cultivating environments that supersede advantages of low cost manufacturing localities.

The market system will determine where companies will invest in operations, where they will hire employees, and how they will contribute to the global economy. Low cost copycats will be drawn to cheaper locations, while innovators will be attracted to places that spark the greatest opportunities for the development of new services and products.

One seeks to to focus on a low cost strategy that uses available technology. The other seeks to dominate the market by leading it through transitions with new products and services. Companies that seek innovative strategies will inherently look for locations that have the right elements that foster knowledge accumulation and intellectual capital.

A cluster exists within a local economy with inherent benefits that allowed these clusters to form in a one location over another. Governments create market conditions by attracting or deterring business investments through government policy making. Business-minded global companies do not invest locally out of patronage or loyalty but because they believe they can achieve the greatest advantages by doing so.

Adam Smith states, "Its not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from the regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages (Smith, 1776)."

As a profit oriented enterprises, governments should move beyond traditional approaches to economics by thinking from the perspective of would be corporate interlopers. What are they looking for, what type of environment are we providing and how do we provide it are essential questions to strong cluster management.

Of course we have choices, and one of them is to not change or adjust our governance to a global marketplace. We can use the same methods, continue to lose corporations, and watch our national debt rise and incomes decline. The role of government is to create polices that are in the best interest of their citizen stakeholders and thus have a responsibility to adjust their thinking when necessary.

Proper cluster management offers opportunities for government to be an environment creator but not seek to fight against the forces that allow are swirling through the global economy. Fighting these forces leads to greater decline. However, they can create local advantages by rethinking some policies that are hurting the ability of business to flourish while at the same time still protecting the needs of citizens.

Nationalism and loyalty are powerful motivators for local businesses but international companies have options where countries are often seen more as tax and cost incentives than believing in a particular national causes. While it is difficult to calculate the amount gained or lost due to corporations moving operations overseas, the amount is likely in the trillions of dollars in tax revenue. Creating strong market driven clusters helps to draw these businesses back to the U.S. because it is their best interest to do so to maintain their profit margins.

Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. London: W. Strahan. Book 1, Chapter 2.